Wall Street News

Swiss, U.S. in talks on tax probe settlement.

by Reuters:

The United States and Switzerland are in advanced talks on a multibillion-dollar deal that would let several Swiss and European banks join a common settlement and avoid potential U.S. prosecution for helping wealthy Americans dodge taxes, senior persons briefed on the matter said.

As part of the agreement under discussion, known as a global resolution, U.S. government agencies would invite the banks to pay a fine, exit their undeclared offshore banking businesses for Americans, and turn over client names to the Internal Revenue Service (IRS) and the Justice Department. In exchange, the agencies would drop an ongoing investigation into the banks.

Three current and former government officials briefed on the matter described the possible agreement but spoke on condition of anonymity on Thursday, citing the wide-ranging investigation of Swiss and European banks by the two agencies. An announcement of a settlement could come as early as July, these persons said. The fines involved could collectively total several billion dollars, they said.

Banks that “opt out” of the deal could face heightened scrutiny from U.S. authorities, including a possible legal summons for client names from the IRS and tougher scrutiny by the Justice Department.

A resolution would signal another strong blow to the Swiss tradition of client confidentiality, whose laws date to 1934 but whose tradition goes back centuries.

In 2009, UBS AG (UBSN.VX) (UBS.N) averted indictment over its undeclared offshore private banking services by agreeing to pay $780 million, admitting to criminal wrongdoing and turning over about 255 client names, later agreed by the two sides at an additional 4,450.

Companies involved in that probe include Credit Suisse (CSGN.VX), the second-largest bank in Switzerland; HSBC (HSBA.L), Europe’s largest bank; Julius Baer, a private bank based in Zurich; and Basler Kantonalbank, a Swiss cantonal bank in Basel, Switzerland. The aftermath of the UBS probe vaulted a number of bankers into the crosshairs of the Justice Department.

At the same time, the IRS is poring over a “roadmap” to Swiss bankers and their intermediaries. The map has been provided by thousands of Americans who have come forward to reveal their hidden offshore accounts under two voluntary programs in exchange for reduced fines and penalties.

Now, based on the flood of criminal actions and information gleaned, both U.S. and Swiss authorities are interested in resolving the wide-ranging probe in one fell swoop, not bank-by-bank, the senior persons said.

“From the voluntary disclosure program, we know that the United States has evidence to indict international, regional, and cantonal Swiss banks and bankers,” said Jeffrey Neiman, a former federal prosecutor who worked on the UBS case.

“We also know that Switzerland does not want to be dealing with the American justice system for the next decade. Throw in the fact that Switzerland will not extradite its own citizens for any crime, let alone a tax crime, and we come to a conclusion that a global resolution makes sense on both sides of the Atlantic,” said Neiman, now in private practice in Fort Lauderdale, Florida.

David Walker, a spokesman for Credit Suisse in New York, declined to comment. Juanita Gutierrez, a spokeswoman for HSBC in New York, declined to comment. Jan Vonder Muehll, a spokesman for Julius Baer, declined to comment.

Calls and emails to Basler Kantonalbank and James Nason, a spokesman for the Swiss Bankers Association, an industry trade group in Basel, were not immediately returned.

Michael Ambuehl, a top Swiss official who is in charge of the country’s international tax matters, has made numerous trips to Washington D.C. in recent months in an effort to hammer out a deal, the senior sources said.

At a conference in Washington organized by the Organization for Economic Cooperation and Development (OECD) this week, a senior IRS official said it planned to move against “one or more banks in the next month or so.”


Redditor coooolbeans notes:

You’re probably right. Maybe a few sacrificial lambs will go to trial or face a nominal fine, but can’t we in the proletariat dream every once in a while?

EDIT: I’m hijacking this post to explain a few things that people are unsure of.

A little background: In 2008 a US Senate panel released a report that accused Swiss bank UBS of aiding in tax evasion. Link

In response to this report, the FBI investigated and a grand jury indicted the CEO of UBS, who subsequently resigned and is now a fugitive. UBS agreed to a $780M fine to settle criminal charges.

The US then opened a civil action against UBS in order to gain access to a list of their accounts. This lead to a special treaty between the US and Switzerland that would authorize the transfer of account info. This treaty had to be passed by Switzerland’s legislature after a court ruled that the treaty broke Swiss secrecy laws. NYTimes and FT articles.

Many people are wondering how the US can force a Swiss bank to do this, well the answer is that the Swiss government made new rules that allowed this and brought their banking secrecy laws more in line with the rest of the world. This treaty and new laws allowed the US to expand their probe of tax evasion and lead to the news in the main article.

Also, it should be noted that the US government has been very serious about tax evasion the past couple of years. A list of companies and people they’ve gone after can be found in this article.


I wonder how this will affect the DOW as foreign banks who own a percentage of U.S banks will be affected.